Read The Full Article On: Marketwatch
Shares of the electric automaker — which have increased fivefold since the beginning of the year — cratered more than 20 percent on Tuesday as investors reacted to the S&P 500’s decision to not add Tesla to its index.
Tesla had been widely expected to join the S&P after achieving its fourth consecutive quarter of profitability. An addition to the blue-chip index would have forced a slew of investment funds that duplicate the S&P’s holdings to buy an estimated $40 billion worth of Tesla shares to avoid errors tracking the index’s performance.
“Clearly the S&P decision is weighing heavily on the stock,” CFRA Research analyst Garrett Nelson told The Post. “The news was really a surprise.”
“They might not want to telegraph their moves because it’s going to cause such a seismic change in the overall holdings of the S&P 500,” Nelson said. “But we still think there’s a deepened chance they do this in the coming weeks.”
Tesla investors were also reacting to the news that the company’s largest outside shareholder, Baillie Gifford, last week reduced its stake in the company from 6.3 percent to just under 5, as well as to the company’s announced plan to raise $5 billion by selling stock.